Christian Svensson - Part Two

Capcom's VP of strategic planning on the challenges of new IP and the growing importance of digital

In the first part of this interview with Capcom's VP of strategic planning and business development, Christian Svensson, he talked about the challenges of the business environment for one-team developers and the publisher's own ongoing Westward-facing development strategy.

Here he talks a bit about the Japanese market, how business models translate to the West, the challenge of launching new IP and why Capcom will be among the best-placed companies to take advantage of an increasing digitally-distributed world.

Q: What are your views on the Japanese market? You mentioned previously that it's static.

Christan Svensson: I have opinions on the matter. I'm a little reluctant to get into detail on them, because of what some of my compatriots in Japan might think of those statements. But it's a challenging market to say the least. I can't really point to any one specific thing that's contributing to it. I think it's a market whose tastes are increasingly diverging from Western tastes; its tastes are increasingly more esoteric.

The exceptions to the rule are some of the really big budget stuff - the Resident Evil 5s, the Street Fighter 4s, the Metal Gears - that do actually have global appeal. Arguably the Final Fantasies fit that rule.

Monster Hunter is an interesting one for us. It's a phenomenon in Japan that we're certainly trying to recreate in the West. We are strategically investing in the brand in the West, because we know that as a company we're going to continue to be creating Monster Hunter content, so it behooves us to do what it takes to make it stick here.

Q: There was talk of charging for online play for Monster Hunter in the West?

Christan Svensson: Let's just say that discussions about business models in the West are ongoing. We have not selected one direction or another. When we get a little closer to release we will definitely be sharing what the model will be.

Q: In the same report, it was mentioned that Lost Planet 2, Dark Void, Super Street Fighter IV, and Resident Evil: The Darkside Chronicles were estimated to be Capcom’s biggest selling titles of 2010, and there is going to be an increased concentration on digital distribution. Aside from Dark Void, there is no mention of new IP. Is Capcom exercising caution, or are there things in the pipeline yet to be announced?

Christan Svensson: Yes, in both cases. I think that we are being a little bit more cautious, particularly in our Western organisation, we were very IP heavy, and that's partially my fault. We've taken some risks, we've tried a few things. At the same time, we've also got some things based on Capcom IP, we've tried some licensed projects.

Jun Takeuchi gave a presentation at DICE last year and one of his bullet points was "Try to keep new IP development to about 20 per cent of your portfolio". I think that edges up a little bit towards the beginning of a hardware cycle, maybe down a little bit towards the middle and end of a hardware cycle. I would say right now we're in the middle, so we're probably right on target.

About 20 per cent of our stock will likely continue to be about new IP. We do need to be creating new brands for the future: that's how we grow the company.

Q: How hard is it to get new IP off the ground?

Christan Svensson: There is nothing more difficult in this business than launching new IP. Capcom is fortunate, and I think has a better track record than most - we do very few licensed properties. Look across our history, and our portfolio of products, and they are all things that we own and control. Resident Evil, Street Fighter, Devil May Cry, Lost Planet, Dead Rising, Okami, Megaman: these are all iconic brands.

And I would look at Okami, Dead Rising and Lost Planet as three of this generation's(ish) successful new launches. We brought back Street Fighter to be relevant again, after a nine or ten-year hiatus of re-releases and rehashes. These are really hard things to do.

Q: Is it harder to release new IP than it was, say, three years ago?

Christan Svensson: I think new IP is always hard. Three years ago, the difference is you're at the beginning of a hardware cycle, where you have the most hardcore consumers who are the most accepting of fresh new ideas. Don't get me wrong, they want their Modern Warfare 3, they love their franchises, but they are also guys who are on the lookout for, and want to evangelise, new playing experiences. We're going to have a longer hardware cycle this time around, so it's going to be a little bit different.

We have a broader audience than we had three years ago. Our new audience may have brought a USD 199 Xbox, or a USD 299 PS3, or a USD 199 Wii - that's a slightly different consumer from the person who would put down USD 599 or USD 499 for a PS3 three years ago. This is a more brand-centric, price sensitive consumer than that earlier consumer, and they are less likely to be as informed about 'that new IP from Capcom' than those guys from three years ago.

Now, those guys from three years ago are still there, but they have a lot more choice in the market today, between what's new and hot, and a slew of 'greatest hits' that are well known and great value for money. So you're competing not just against what's out on the market today, but what's been out on the market for the last three years.

Q: Let's talk about digital distribution -

Christan Svensson: A subject very near and dear to my heart.

Q: How far away are we from a disk-free world?

Christan Svensson: If it were up to me it would be tomorrow. However, there are other gatekeepers who will make those decisions for me. Sony, I think, has taken a very bold step with the PSPgo - I think it is an excellent first step in the all-digital future. I am eagerly awaiting the day that Microsoft expands its Games on Demand programme to encompass more than just platinum hits.

Xbox Live Arcade, as you know, we've been a major component of, and the PlayStation Network. We've been more aggressive than any of our other competitors in pushing digital-only gaming content.

We have twelve or thirteen released titles, with more on the way. It has been one of my major initiatives at Capcom to make sure we are at the forefront of understanding how the mechanics of digital distribution and marketing work. Because it is very different from retailing packaged goods.

There are going to be a lot of other companies that are going to approach digital as they do retail, and they are going to lose a lot of money. Figuring out the right scales, figuring out the right vehicles for marketing, figuring out the right announcement strategies: they're all different with digital. It's not rocket science, but until you go through it a few times, and until you figure out how to build the right products for that audience - because this is a slightly different audience too, with very specific tastes - people are going to struggle.

Q: Are you happy with the success of Capcom's digital-only gaming content?

Christan Svensson: There are challenges to digital: there is not the transparency of sales figures. So building models around what you think your forecast is going to be and what you should spend on a title is difficult. A lot of publishers have been going by Braille -some have been lucky; some have been not so lucky.

Not everything Capcom have done has been successful, but that's par for the course for our business. We have three titles that have drastically over-performed our expectations, the most recent of which was Marvel vs Capcom 2, which we didn't expect to exceed Super Street Fighter 2 Turbo HG Remix's numbers, but it has.

A couple of our new IPs have not quite performed to the level that we would have hoped, one performed almost exactly as forecast, and I would argue that the ones that are underperforming are less to do with the market and more to do with the products, and their appropriateness for where they went.

But it has been a learning experience, no question about it. So, am I happy with it? Absolutely. I'm really thrilled that we've been able to make a real business out of digital.

Is it a huge chunk of our revenues? No, but it's a growing chunk. Because of the margins in that business for us, I'm cautiously optimistic that it's going to play a larger role in what we do.

Q: How long will it take for the majority of consumers to accept full-length downloadable games?

Christan Svensson: It depends. Look at the PC: It's already there. Our digital business on PC is already generating more revenue than our retail business. It's just going to be a matter of time before the console side catches up. Part of the reason why I participate as actively as I do in the PC Gaming Alliance is because anything interesting that happens on the PC eventually migrates to the console. So learning and understanding what works on PC, on whatever scale it's happening there, will have interesting ripples further down the line in console models.

Christian Svensson is Capcom's VP of strategic planning and business development. Interview by Lucy O'Brien.

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